Average prices for LCD panels used in flat-screen TVs and desktop and notebook PCs have fallen several percentage points in the past month and will continue to decline, analysts say.

Although the continuing price decreases are good news for consumers, they are bad news for low-end manufacturers of smaller screens that use older technology, because they are already operating with very thin profit margins.

The market price for 17in LCD monitor panels fell 2.1 per cent to $137, and the smaller panels used in notebook PCs saw an even bigger decline of up to five per cent, reported Taiwan-based KGI Securities. KGI based its analysis on data provided by LCD market research firm Witsview.

"Declining monitor and notebook panel prices are attributable to weak PC demand, which is not expected to regain momentum until the third quarter of 2006," Shanghai-based analysts Angus Lin and Judith Chen wrote in a KGI research briefing published today.

"But we believe that the price decline of monitor and notebook panels will decelerate in the second quarter."

With intense competition turning mature LCD products into commodities, low-end LCD manufacturers will suffer losses as the panel prices fall below manufacturing costs, observers warned.

"Losses will grow in the first quarter of 2006 when the 17in monitor panel price is expected to drop to an average of $142, down 13.9 per cent quarter on quarter," said KGI's analysts.

KGI named China's BOE Technology Group as an example of the kind of manufacturer likely to be hurt by pricing pressures.

In the LCD manufacturing pecking order, Japanese companies generally have the most advanced and most profitable technologies, followed by Korean, Taiwanese and Chinese manufacturers.

In a sign of increased price competition AU Optronics, a major Taiwanese LCD panel maker, has slashed its LCD TV panel prices below the market average, according to a report in local technology paper Digitimes.

The paper cited unnamed market sources for its information about the manufacturer, which is ranked amongst the world's top 10 LCD makers. The report pointed to competition and weak LCD TV demand in Europe as likely reasons for the price cut.

Increasing LCD panel output from new factories belonging to Samsung and LG-Philips is a key factor in the decline of LCD TV panel prices, according to analysts at Primasia Securities in Taipei.

However, Primasia predicted in a research note issued earlier this week that local LCD TV panel makers, such as AU Optronics, will be able to reduce their manufacturing costs fast enough to continue making what Primasia describes as " lucrative profits".

According to some observers, falling LCD panel prices will help drive demand in some other areas, such as home theatre add-ons and graphics cards, as consumers upgrade PCs to match their new screens.